The shares rose 8p to 541p in anticipation even though Murdoch recently warned investors that the decision to give away high-speed internet access to its highest spending subscribers would have a 'significant' impact on profits. Broker Cazenove says Sky will incur £80m of losses in the first year.

BSkyB acquired UK broadband provider Easynet for £211m late last year to gain a foothold in the fast-growing broadband market. Analysts believe Sky will offer free broadband to all premium subscribers who pay more than £40 a month for TV. It means more than 4m customers will have an option to take free broadband immediately.

Charles Dunstone's Carphone Warehouse, which made its competitors sit up and take notice when launching its 'free broadband' forever package in April, shed 7p to 275½p. Competition will hot up even further in the autumn when BT (1½p easier at 230¼p) launches its TV over the internet service, BT Vision.

Carphone will have to clean up its marketing act after the Advertising Standards Authority upheld complaints from a number of rivals over its 'free broadband' claims when highspeed web access, line rental and free landline calls in the UK and 28 other countries costs £21 a month.

Against all the odds and amid further heavy fighting in the Middle East, the Footsie retrieved a 53-point decline to trade 13.5 higher by 3pm.

Dealers heaved a sigh of relief when Wall Street rallied 63 points in the early stages following a strong secondquarterearnings performance from fast food chain McDonald's. London closed 6.6 points easier at 5701.

Utilities, always a safe port in a storm, attracted support for their defensive qualities. Kelda rose 19p to 810p, Centrica 5p to 275¼p, Scottish Power 5½p to 578p, Severn Trent 9p to 1194p and Scottish & Southern Energy 5p to 1148p.

Permira and Barclays Capital have tabled a £1bn or £10-a-share offer while Scottish entrepreneur Sir Tom Hunter and the Reuben Brothers said they were considering launching a 1030p-a-share counter bid.

Barratt Developments erected a 7p gain to 917½p after revealing it has been chosen by English Partnerships to build more than 500 homes at Harlow, Essex.

Following the 13-for-11 share consolidation that accompanied the issue of a special B share worth 127p which was part of a cash return to shareholders, investor 3i closed 2½p above Friday's close at 863p.

Investors in online gaming stocks cashed in their chips on hearing that David Carruthers, chief executive of BetonSports (24½p lower at 122½p), had been arrested by US authorities.

Selling of Sportingbet was particularly heavy and the close was 42¼p lower at 282p. Director Bob Holt obviously thought the fall was overdone and bought 40,000 shares at prices between 284p and 290p.

Defence technology firm Ultra Electronics, which has nosedived 15% over the past three months, rose 17½p to 907½p. It has won a £56m contract from the Ministry of Defence to supply UK Eurofighter Typhoon aircraft with airborne laser targeting pods.

European Goldfields added 2½p at 166½p after announcing a 13% increase in its gold reserves on Skouries, northern Greece. From

3.7m gold ounces to over 4m, it makes it the largest gold deposit in Europe.

• DEALERS say keep an eye on Redstone at 53/8p.Yesterday's egm cleared its £16.9m acquisition of Symphony Telecom which moves it into the mobile phone market for small and mediumsized companies and increases its customer register by more than 8,000. It has a solid shareholder base with ubiquitous private equity group SVG Capital and Gartmore owning 18% apiece. The outlook looks bullish.